What do entrepreneurs actually do?

An entrepreneur is a person who actively forms or leads its own business (UITM Entrepreneurship Study Group, 2012). It is a person who converts a business idea into a new venture. Even though changes in economic and political situation, technological advances, social networks and assisting organizations may play a significant role in creation of a new venture, however it is entirely an entrepreneur’s decisions that will lead a new venture to the success or failure.

    It is believed that a potential entrepreneur must have a set of personal characteristics, such as self-confidence, creativity, ability to see and use an opportunity, ability to persuade, lead and give inspiration to others, etc. ‘Since entrepreneur’s behavior is crucial to the creation and development of new ventures,…attaining a better understanding on what entrepreneurs actually do would greatly benefit the growing discipline of entrepreneurship’(S. Mueller, T. Volery &  Bjorn von Siemens, 2012).

Numerous studies have been conducted in order to study organizational behavior of individuals. However the majority of such studies were focused on the organizational behavior of managers of existing companies, thus the findings of such studies do not reflect the behavior of entrepreneurs as entrepreneurs do not take part in routine activities that managers do. Neither an entrepreneur’s activities involved in creation of a new company possess any similarities with activities involved in operating an existing company.

The previous research on entrepreneur’s behavior have identified that an entrepreneur’s behavior changes over time, depending on the stage of a company and the set of tasks performed by an entrepreneur in early stages of establishing a new venture differ from those that are performed during the later stages (Hambrick & Crozier, 1985; McCarthy, Krueger, & Schoenecker, 1990, cited in S. Muller).

The activities that an entrepreneur performs in the early stages usually involve writing a business plan, searching for a location, completing legal formalities, hiring a first employee, etc. According to Lichtenstein et al. (2006) research’ typical start-up behaviours include investing personal capital, developing a prototype, defining an opportunity, organizing a founding team, forming a legal entity, installing a business phone, purchasing major equipment, opening a bank account, and asking for funding’(S .Muller et al.,2012).

 

As stated above, an entrepreneur performs different set of activities in the growth stage of a business that in the early establishing stage. As their business grows, entrepreneurs may experience a need of restructuring their responsibilities as well as expectation from others. Moreover, obviously, the entrepreneurs in later stages have higher level of education and experience, work harder and were more involved in the decision making processes of a company. At this stages, as sales grow, the production of outputs become larger, it is becoming difficult (unlike in the early stages of a business) for an entrepreneur to control the entire structure by him/herself, consequently such responsibilities are being transferred to managers. Instead, an entrepreneur focuses on creating a sufficient structure, controls and organizes system’s activities. The tasks are shifting from entrepreneurial to more managerial. Furthermore, numerous studies have shown that ‘the start-up entrepreneurs had longer working hours than growth-stage entrepreneurs: on average, 11.8 hours per day for the former and 10.6 hours for the latter. On average, start-up entrepreneurs performed 90.6 actions per day, whereas growth entrepreneurs performed 94.8 actions per day. For both groups, most actions lasted less than 5 minutes. For start-up entrepreneurs, 63% of all activities took 5 minutes or less (accounting for 19% of their working time). The percentage was even higher for later stage entrepreneurs (with 70% of their actions lasting 5 minutes or less, accounting for 24% of their working time)’(S. Muller et al., 2012).Interestingly, it was found that entrepreneurs in early stages of business spend more time on exchanging information and opinions and working analytically and conceptually. The sum of both these activities is totalling more than 60% of working time. On the other hand, entrepreneurs in the later stages spend much less of their time on working analytically and conceptually about half that early entrepreneurs do. In addition, both start-up and growth entrepreneurs concentrate their actions mainly on three functions -human resources and employee relations; marketing, sales, and PR; and administration. By comparison, start-up entrepreneurs spend significantly more time on environmental observation( as early stages of business still require a search for an opportunity), whereas later stage entrepreneurs spend significantly more time on business development, in order to expand.

In terms of communication, both entrepreneurs in early stages and growth entrepreneurs spend significant amount of their working time on communicating with others. But, in the growth stages entrepreneurs spend much more time than early stage entrepreneurs do. This could be due to expanding network of customers and business partners.

In conclusion, as the majority of research and studies about entrepreneur’s behaviour were performed on a small sample of population, many findings were generalised. As well, as entrepreneur’s actions in business are related to his/her personal characteristics, each entrepreneur has its own way of establishing, organising, leading and expanding a new venture. As well in different stages entrepreneurs perform different tasks. However, among differences, many commonalities were found too. And the data collected from numerous researches and studies will help new entrepreneurs to acknowledge and be prepared to tasks awaiting them on their way of creating a new venture.

 

 

 

 

References:

Hambrick, D.C. & Crozier, L.M. ,1985.  Stumblers and stars in the management of rapid growth. Journal of Business Venturing, 1(1), 31–45.

McCarthy, A.M., Krueger, D.A., & Schoenecker, T.S.,1990. Changes in the time allocation patterns of entrepreneurs. Entrepreneurship Theory and Practice, 15(2), 7–18.

Lichtenstein, B., Dooley, K., & Lumpkin, G. (2006). Measuring emergence in the dynamics of new venture creation. Journal of Business Venturing, 21(2), 153–175.